Thursday, August 20, 2015
6:55:07 PM EDT

Uncertainty Erases Market Gains For 2015

by
James Brown

Worries over if the Federal Reserve should raise rates and a slowing global economy fueled a widespread sell-off. Stock markets were negative across the globe from Asia to Europe and the U.S. Both the European and American markets fell -2% while the Chinese Shanghai plunged -3.4%. The S&P 500 and Russell 2000 indices are now negative for the year.

CAN, DIS, and MKC hit our stop losses today.

Current Portfolio:

CALL Play Updates

General Dynamics - GD - close: 148.93 change: -3.82

Stop Loss: 147.50
Target(s): To Be Determined
Current Option Gain/Loss: -35.2%
Average Daily Volume = 1.3 million
Entry on August 19 at $153.55
Listed on August 17, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments: 08/20/15:
Investors were selling everything today and GD was hit with a -2.5% drop. Shares erased the last week and a half worth of gains. The recent lows near $147.75 should be support. If that doesn't hold then GD will hit our stop at $147.50.

No new positions at this time.

Trade Description: August 17, 2015:
Worries over the U.S. sequestration defense cuts are in the rear view mirror for companies like GD. They have adjusted and now they are adding international customers to account for slower defense spending growth from the U.S. The stock has delivered strong gains over the last few years and the relative strength continues this year. The S&P 500 index is up +2.1% year to date. The defense and aerospace ETF (ITA) is up +5.8%. Yet shares of GD are up +11% and just closed at a new all-time high.

GD is considered part of the industrial goods sector. The company is a huge aerospace and defense company. They have four significant segments: aerospace, combat systems, information systems, and marine systems (ships and submarines). The defense industry in the U.S. has been saddled with significant budget cuts due to the 2011 sequestration deal that will shave $500 billion from U.S. defense spending from 2012 through 2021. The industry has managed to thrive in spite of these budget cuts.

GD has beaten Wall Street's earnings estimates several quarters in a row. They have also managed to beat analysts revenue estimates the last three quarters in a row. GD's most recent earnings report was July 29th. Management announced earnings of $2.27 per share, which was 22 cents better than expected. It also represents earnings growth of +44% from a year ago. Revenues were up +5.5% to $7.88 billion, above estimates. Margins improved +1% to 13.7%. Furthermore GD management raised their 2015 earnings guidance to $8.70-8.80 per share, above Wall Street estimates. GD's backlog was $70 billion at the end of the second quarter.

We all know that the world isn't getting any safer and the major defense contractors have been working on boosting their overseas sales just in case the U.S. decides to cut defense spending again. Considering the current state of world affairs with a growing military rival in China, a new cold war brewing with Russia, and an openly hostile ISIS, defense spending should stay healthy.

GD has a very active stock buyback program. They purchased 7.5 million shares last quarter. The big buyback is one reason Goldman Sachs listed GD as one of their top five favorite stocks recently.

Shares of GD have been marching higher since they bottomed in April this year. The point & figure chart is bullish and forecasting a $181.00 target. The last couple of weeks have seen GD consolidating sideways after shares spiked higher on its July 29th earnings report. Today saw GD set a new closing high and it's about to breakout past its intraday high. Tonight we are suggesting a trigger to buy calls at $153.55.

Stop Loss: 121.45
Target(s): To Be Determined
Current Option Gain/Loss: -2.9%
Average Daily Volume = 427 thousand
Entry on August 12 at $121.60
Listed on August 11, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments: 08/20/15:
Traders rushed to lock in profits on LII. The stock gapped open lower at $124.84 and closed just below technical support at its rising 10-dma for a -2.58% decline.

No new positions at this time.

Trade Description: August 11, 2015:
Record profits and relative strength have made a recipe for new highs in LII. Shares have been outperforming the market with a +27% gain year to date.

LII is in the industrial goods sector. According to the company,
"Lennox International Inc. is a global leader in the heating, air conditioning, and refrigeration markets."

The company has beaten Wall Street's earnings estimates in three of the last four quarterly reports. Although according to the IBD, LII's Q3 earnings miss was the first drop in three years.

LII's most recent report was July 20th when they announced their Q2 results. Earnings were up +22% from a year ago to $1.84 per share, which was three cents above estimates. Revenues improved +3.3% to $992.5 million, also better than expected. Management raised their full year 2015 earnings guidance.

"Lennox International posted record profits in the second quarter with margin expansion across all three of our businesses. Total segment profit margin for the company expanded 120 basis points from the prior-year quarter to a record 13.5%. In our Residential business, we hit record revenue, margin and profit levels. Residential revenue was up 6% at constant currency, and margin expanded 190 basis points to 18.0%. In Commercial, segment profit reached new highs while revenue and margin set second-quarter records. Commercial revenue was up 10% at constant currency, and margin expanded 80 basis points to 17.0%. North America national account business resumed growth as expected, with revenue up high single-digits, and we continued to see success in non-national account business with mid-teens revenue growth. In Refrigeration, revenue was up 4% at constant currency, driven by high single-digit growth in North America. Refrigeration margin ticked up 10 basis points to 7.2%, including headwinds from negative foreign exchange and the mid-2014 repeal of the carbon tax on refrigerant in Australia."

The stock market rewarded LII shareholders with a huge pop from about $107 to $116 on this earnings news. Shares have been very resilient since this earnings announcement. Investors have been buying the dips and LII has avoided a lot of the market's volatility.

Yesterday LII managed to breakout from its post-earnings sideways consolidation and rally past resistance near $120.00. LII displayed relative strength again today. The point & figure chart is bullish and forecasting at $136.00 target. Tonight we are suggesting a trigger to buy calls at $121.60.

Stop Loss: 54.40
Target(s): To Be Determined
Current Option Gain/Loss: -15.9%
Average Daily Volume = 7.2 million
Entry on August 10 at $56.00
Listed on August 06, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments: 08/20/15:
The rush to take profits in stocks today fueled a -3.0% drop in shares of SBUX. The stock is nearing technical support at the 50-dma near $55.50. If that doesn't hold then the August low near $54.95 might be the next level of support.

No new positions at this time.

Trade Description: August 6, 2015:
Investors seem spooked today. There was widespread selling and a lot of the profit taking was focused on recent winners. Tim Seymour, managing partner at Triogem Asset Management, said traders were "cutting their flowers and keeping their weeds" today. SBUX looks like one of those cut flowers and we want to be ready to catch it when it stops falling.

Here is tonight's trade description:

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. SBUX broke out of that sideways funk after it reported earnings in January 2015.

Five-Year Plan

In late 2014 SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a great 2015 so far with the stock up +39% (that's after today's -3.0% decline), outperforming the broader market. The stock accelerated following its Q1 2015 earnings results in January and again when they reported in April.

It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week.

SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years.
Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact. They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The trend of earnings pops continued in July with shares gapping up to new all-time highs following its Q2 report on July 23rd. Earnings were $0.42 per share, a penny above estimates. Revenues were up +17.5% to $4.88 billion, just a hair above expectations. Global same-store sales were up +7% and their non-GAAP operating margin improved 100 basis points to 19.5%. Management is still guiding 2015 revenues to rise +17% in the $19.1-19.4 billion range.

The stock has been extremely resilient until today. We suspect that today's decline will see some follow through lower but investors will likely buy the dip at SBUX's up trend. Shares should find support in the $56.00 area. Tonight we are listing a buy-the-dip entry trigger at $56.00. We'll try and limit our risk with a stop loss just below the 50-dma (start at $54.40).

- Suggested Positions -

Long OCT $60 CALL (SBUX151016C60) entry $0.63

08/10/15 triggered on a dip at $56.00
08/08/15 Added a second entry trigger to buy calls at $57.65 (in addition to our buy-the-dip trigger at $56.00)
Option Format: symbol-year-month-day-call-strike

Stryker Corp. - SYK - close: 102.52 change: -2.01

Stop Loss: 101.75
Target(s): To Be Determined
Current Option Gain/Loss: -7.1%
Average Daily Volume = 1.1 million
Entry on July 29 at $102.15
Listed on July 28, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments: 08/20/15:
SYK just erased the last four days of gains with a -1.9% drop today. Shares are nearing what should be support at the rising 20-dma (currently about $102.30). If SYK doesn't bounce near $102.00 we'll likely be stopped out.

Trade Description: July 28, 2015:
The healthcare sector has consistently delivered a strong bullish performance for the last three years in a row. When you think of healthcare you might think health insurance providers. They are not the only healthcare stocks in rally mode. Tonight's candidate is in the medical equipment and supplies industry.

According to the company, "Stryker is one of the world's leading medical technology companies and together with our customers, we are driven to make healthcare better. The Company offers a diverse array of innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine, which help improve patient and hospital outcomes. Stryker is active in over 100 countries around the world."

Late last year the company's earnings growth was lackluster at best but the company has turned things around the last couple of quarters. SYK reported their Q1 results on April 21st. They beat the bottom line estimate. Revenues were only in-line with estimates. Yet management raised the low-end of their 2015 sales and earnings guidance. You can see the reaction to the stock price in April.

Their most recent earnings report was July 23rd. Wall Street was expecting Q2 earnings of $1.17 per share on revenues of $2.41 billion. SYK beat both estimates with earnings growth of +11% to $1.20 per share. Revenues were up +2.9% to $2.43 billion. On a constant currency basis their sales were up +7.6%.

SYK management raised their organic growth forecast to +5.5% to +6.5%. They raised both their Q3 and 2015 earnings forecast above analysts' estimates. SYK now expects full year earnings in the $5.06-5.12 range versus consensus estimates at $5.03 per share. Analyst reaction has been positive with several price target upgrades into the $107-110 range. The point & figure chart is bullish and currently forecasting at $111.00 target.

We like how SYK displayed relative strength last week and resisted most of the market's sell-off (prior to their earnings report). The better than expected Q2 results launched SYK to new all-time highs. Traders bought the dip this morning and today is a new all-time closing high for SYK. Tonight we are suggesting a trigger to buy calls at $102.15.

Stop Loss: 68.20
Target(s): To Be Determined
Current Option Gain/Loss: -46.5%
Average Daily Volume = 5.4 million
Entry on August 04 at $70.25
Listed on August 03, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments: 08/20/15:
I don't have much hope left for our TEVA trade. The stock followed the market lower with a -1.9% decline and erased its recent bounce. The intraday low was $68.22 and our stop is $68.20. Odds are very high that we'll see TEVA hit our stop tomorrow morning. The biggest risk now is TEVA gapping lower tomorrow.

Trade Description: August 3, 2015:
The combination of M&A news and improving earnings results has been a win-win for shares of TEVA. The stock recently soared to new all-time highs on some key headlines in the last several days.

TEVA is in the healthcare sector. They're part of the drug manufacturing industry. According to the company, "Teva Pharmaceutical Industries Ltd. is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world's largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. Teva integrates its generics and specialty capabilities in its global research and development division to create new ways of addressing unmet patient needs by combining drug development capabilities with devices, services and technologies. Teva's net revenues in 2014 amounted to $20.3 billion."

TEVA's most recent earnings report was July 27th. Analysts were expecting a profit of $1.29 per shares for TEVA's Q2 results. The company delivered $1.43 per share. Revenues fell -1.5% to $4.97 billion but that was actually better than expected. TEVA's management then raised their 2015 guidance from $5.05-5.35 per share to $5.15-5.40 compared to Wall Street's estimate at $5.21.

If beating earnings and raising guidance wasn't enough to drive the stock higher TEVA also announced major acquisition news. TEVA had been trying to buy British drug firm Mylan (MYL) with an unsolicited bid. Meanwhile MYL is trying to buy Perrigo (PRGO). MYL didn't seem interested in being acquired by TEVA and actually adopted a poison pill strategy to make it less attractive to hostile takeovers.

On July 27th TEVA announced they had dropped their bid for MYL and instead announced a deal to buy Allergan's (AGN) generic drug business for $40.5 billion. TEVA will pay $33.75 billion in cash and $6.75 billion in stock, giving AGN a 10% stake in TEVA. They expect the deal to close in the first quarter of 2016.

According to a Reuters article, "Teva, which will gain a portfolio of more than 1,000 products, forecast a double-digit boost to adjusted earnings per share in 2016 and a more than 20 percent benefit in years two and three after closing the deal. It expects cost synergies and tax savings of $1.4 billion annually by the third anniversary from efficiencies in operations, manufacturing, and sales and marketing."

Wall Street applauded the deal with AGN and shares of TEVA soared from $62 to $72 in a single day.

TEVA has continued its M&A with another story out today.
This morning, before the opening bell, TEVA announced it will purchase a 51% stake in a privately-held, genomic-analysis company, Immuneering Corporation. According to the press release "Immuneering uses advanced proprietary techniques to identify hidden signals and biological insights across an array of genetic, genomic, and proteomic data that can direct research for enhanced discovery, development and clinical success." The two companies have worked together before. Financial terms were not disclosed.

The AGN deal has gotten Wall Street's seal of approval. Several analyst firms have upgraded TEVA since then with multiple price target upgrades including: $82 from Deutsche Bank, $82 from Argus, $85 from RBC, $85 from Morgan Stanley, $86 from Citigroup. Just today J.P.Morgan restarted coverage on TEVA with an "overweight" and an $82 target. The point & figure chart is bullish and forecasting a long-term target of $98.00 for TEVA.

Shares of TEVA saw a $4.00 pullback but traders have started buying the dip. We want to hop on board if this bounce continues. Tonight we're suggesting a trigger to buy calls at $70.25.

Stop Loss: 74.25
Target(s): To Be Determined
Current Option Gain/Loss: -26.6%
Average Daily Volume = 711 thousand
Entry on August 17 at $78.25
Listed on August 15, 2015
Time Frame: Exit PRIOR to earnings in late October
New Positions: see below

Comments: 08/20/15:
TPX underperformed the S&P 500 with a -2.79% decline. The next level to watch is potential support at $75.00, which is underpinned by its rising 20-dma.

No new positions at this time.

Trade Description: August 15, 2015:
TPX is turning out to be one of the better performing stocks this year. The S&P 500 index is only up +1.6% in 2015. Yet TPX has soared +41%. That's because the company has been delivering with its earnings results.

If you are not familiar with TPX they are in the consumer goods sector. According to the company, "Tempur Sealy International, Inc. (TPX) is the world's largest bedding provider. Tempur Sealy International develops, manufactures and markets mattresses, foundations, pillows and other products. The Company's brand portfolio includes many of the most highly recognized brands in the industry, including Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturepedic®, Optimum® and Stearns & Foster®. World headquarters for Tempur Sealy International is in Lexington, KY."

Back in February this year shares of TPX plunged from about $56.00 down to $49.00 when the company warned and lowered their earnings and revenue guidance for all of 2015. This may be a case of setting expectations with an under promise and over deliver strategy.

Looking at TPX's recent earnings results they have beaten Wall Street's estimates on both the top and bottom line the last three quarters in a row. They've actually raised their 2015 earnings guidance the last two quarterly reports.

TPX's most recent report was July 30th. The company's Q2 profit swung from a loss a year ago to a profit of $0.53 per share. That was eight cents better than expected. Their adjusted net income was up +38.8% from a year ago and up +49% on a constant currency basis. Revenues were up +6.9% to $764.4 million, above expectations. Gross margins improved +140 basis points to 38.9%. TPX said they saw double digit sales growth in both North America and internationally (when you back out currency headwinds). Management raised their 2015 earnings guidance from $2.80-3.15 per share to $3.00-3.20.

Shares of TPX surged on this bullish outlook and rallied toward $78.00. The last two weeks have seen TPX consolidate sideways under this new resistance at $78.00. Shares have been relatively resistant to the market's volatile swings in August. If shares can breakout past $78 we could see TPX make a run towards its all-time high near $87.50 set in April 2012. The point & figure chart is more optimistic and forecasting at $95.00 target.

Tonight we are suggesting a trigger to buy calls at $78.25. Plan on exiting prior to TPX's earnings report in late October.

Stop Loss: 95.65
Target(s): To Be Determined
Current Option Gain/Loss: -30.5%
Average Daily Volume = 2.3 million
Entry on July 28 at $97.55
Listed on July 27, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments: 08/20/15:
As of yesterday UA was only a couple of points away from new all-time highs. When the market accelerated lower today, traders decided to take some money off the table. UA underperformed with a -3.4% that broke down below short-term technical support levels at its 10-dma and 20-dma.

No new positions at this time.

FYI - UA's upcoming stock split - UA is hosting a special stockholder meeting on August 26th, 2015 to vote on its stock split plans. UA's upcoming split is different than normal because the company is creating a new class of stock - Class C shares. If you hold Class A or Class B shares then you'll receive one new share of Class C. Essentially this is a two-for-one stock split but the new Class C shares will not have any voting rights and will trade under a different stock symbol. Why is UA pursuing this more complicated process for what is in effect a 2:1 split? The answer is CEO Kevin Plank. Class A shares have one vote per share. Class B shares have 10 votes per share. Plank owns most of Class B shares and wants to maintain control of UA.

Trade Description: July 27, 2015:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it's actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but they saw growth of +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance. UA reported their 2014 Q4 results on February 4th.
The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations.

The company delivered a repeat performance when they did it again with their Q2 earnings on July 23rd. Analysts were expecting a profit of $0.05 per share on revenues of $761.7 million. UA beat both estimates with a profit of $0.07 per share. Revenues were up +28.5% to $783.5 million. Management raised their 2015 revenue guidance from $3.78 billion to $3.84 billion. That's above analysts' estimates of $3.83 billion.

Wall Street reacted to UA's Q2 report with a wave of price target upgrades. Several firms upped their target on UA into the $105-114 range. Naturally the stock rallied on this bullish earnings report and the analyst outlook. The stock soared past resistance near $90.00. More importantly UA has managed to maintain these gains in the face of a widespread market sell-off. We like that kind of relative strength.

Tonight we are suggesting a trigger to buy calls at $97.55. We'll try and limit our risk with an initial stop loss at $93.65.

Stop Loss: 64.35
Target(s): To Be Determined
Current Option Gain/Loss: +62.7%
Average Daily Volume = 2.0 million
Entry on July 24 at $66.80
Listed on July 23, 2015
Time Frame: Exit PRIOR to earnings in late September
New Positions: see below

Comments: 08/20/15:
Positive analyst comments for BBBY failed to stop the sell-off. Although it is worth noting that BBBY only lost -1.1% versus a -2% drop among the major indices. Shares of BBBY are about to breakdown under short-term support in the $62.75 area.

Tonight we are moving the stop loss down to $64.35.

Trade Description: July 23, 2015:
This year is not shaping up very well for bullish investors in BBBY. The stock is down -11.6% year to date. The trouble started with its earnings report back in January.

If you are not familiar with BBBY they are in the services sector. According to the company, "Bed Bath & Beyond Inc. and subsidiaries (the "Company") is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in store, online or through a mobile device.

The Company has the developing ability to have customer purchases picked up in store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other industries.

Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond. Shares of Bed Bath & Beyond Inc. are traded on NASDAQ under the symbol "BBBY" and are included in the Standard and Poor's 500 and Global 1200 Indices and the NASDAQ-100 Index. The Company is counted among the Fortune 500 and the Forbes 2000."

On January 8th BBBY reported its 2014 Q3 results. Earnings were in-line with estimates but revenues missed. Management lowered their same-store sales guidance. The stock plunged the next day. A few weeks later BBBY had managed to recover but the rally failed producing a bearish double top.

The trouble continued in April. BBBY had rallied up into its earnings report and then disappointed. Their 2014 Q4 results were in-line with estimates at $1.80 a share. Yet revenues missed estimates again. They lowered their Q1 guidance. The stock plunged the next day.

On June 24th BBBY reported earnings of $0.93 per share. That was down -1% from a year ago and a penny worse than expected. Revenues were only up +3% to $2.74 billion, which met expectations. Yet comparable store sales were +2.2% when Wall Street was expecting +2.5%. Management lowered their Q2 guidance. Guess what happened the next day? Yup, the stock dropped. Traders immediately sold the bounce and BBBY now has a clearly defined bearish trend of lower highs and lower lows. One has to wonder how bad would BBBY's Q1 results have been had the company not spent $385 million buying back stock last quarter?

In summary, BBBY has been missing Wall Street's revenue or earnings estimates the last three quarters in a row. They have warned twice and same-store sales are disappointing. Technically shares have broken down below multiple layers of support. The company is more of a home furnishing store so back to school season may not give them much of a boost. The point & figure chart is bearish and forecasting at $60.00 target.
The last few days have seen some support near $67.00. We are suggesting a trigger to buy puts at $66.80.

Stop Loss: 88.55
Target(s): To Be Determined
Current Option Gain/Loss: +5.3%
Average Daily Volume = 639 thousand
Entry on August 19 at $84.75
Listed on August 18, 2015
Time Frame: Exit PRIOR to earnings in November
New Positions: see below

Comments: 08/20/15:
JACK resumed its down trend with a -2.5% decline and a new six-month closing low. If you were looking for a new entry point you got it today.

Trade Description: August 18, 2015:
Wall Street can be a fickle place. Sometimes a company seems to be doing everything right and their stock gets crushed anyway. That appears to be the case with JACK.

JACK is in the services sector. According to the company,
"Jack in the Box Inc., based in San Diego, is a restaurant company that operates and franchises Jack in the Box® restaurants, one of the nation's largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam. Additionally, through a wholly owned subsidiary, the company operates and franchises Qdoba Mexican Grill®, a leader in fast-casual dining, with more than 600 restaurants in 47 states, the District of Columbia and Canada."

JACK reported its 2015 Q3 results on August 5th. Earnings rose +17% from a year ago to $0.75 per share. That beat estimates by three cents. Revenues were up +3.2% to $359.5 million, which is essentially in-line with estimates. Their margins improved 270 basis points to 21.8%. Their Jack in the Box business saw comparable store sales of +7.3% versus +2.4% a year ago. Qdoba's comps were +7.7% vs. +7.5% a year ago. That's significantly above rival Chipotle Mexican Grill's comparable store sales, which only rose +4.3%.
Management said their catering business for Qdoba saw double-digit gains. They even raised their fiscal year 2015 earnings guidance from a range of $2.90-3.00 a share to $2.97-3.03 per share. Wall Street was estimating $2.99.

In spite of all of these positives JACK's stock price was hammered the next day on August 6th with a plunge from $97 to almost $89 intraday. Now two weeks later shares of JACK are trading down -11% from its pre-earnings high. Why are shares of JACK being punished? That's a really good question. The only issue I can see might be the pace of store openings for their Qdoba brand. Previously JACK was forecasting 50 to 60 new Qdobas this year. In their last earnings report that estimate dropped to 40 to 45 new Qdobas.

At the moment, it doesn't matter what the reason is. JACK has reversed lower and reversed hard. The point & figure chart has turned bearish and is now forecasting at $74.00 price target. Today saw JACK close below technical support at its simple 200-dma for the first time since November 2012. JACK looks like it's about to breakdown under key support near the $85.00 level. Tonight we are suggesting a trigger to buy puts at $84.75.

FYI: JACK will trade ex-dividend on Monday, August 24th. The quarterly dividend should be $0.30.

Stop Loss: 97.75
Target(s): To Be Determined
Current Option Gain/Loss: +20.4%
Average Daily Volume = 1.3 million
Entry on August 20 at $93.49
Listed on August 19, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: Yes, see below

Comments: 08/20/15:
MNK was one of the market's worst performers today with a -6.3% decline. Our plan was to buy puts if MNK hit $94.35 but our trade was opened on the gap down at $93.49. Shares plunged toward $90.00 and closed below this potential support level.

If you missed the entry this morning I would not chase it now. We are moving our stop loss down to $97.75.

Trade Description: August 19, 2015:
Normally you might think of mergers and acquisitions in the healthcare sector is a bullish recipe. It has been a winning combination for Irish drugmaker MNK who has been actively buying smaller rivals. Unfortunately, after the company's most recent earnings report, Wall Street is worried they may have paid too much for a recent purchase.

MNK is in the healthcare sector. According to the company,
"Mallinckrodt is a global specialty biopharmaceutical and medical imaging business that develops, manufactures, markets and distributes specialty pharmaceutical products and medical imaging agents. Areas of focus include therapeutic drugs for autoimmune and rare disease specialty areas like neurology, rheumatology, nephrology and pulmonology; neonatal critical care respiratory therapies; and analgesics and central nervous system drugs for prescribing by office- and hospital-based physicians. The company's core strengths include the acquisition and management of highly regulated raw materials; deep regulatory expertise; and specialized chemistry, formulation and manufacturing capabilities. The company's Specialty Brands segment includes branded medicines; its Specialty Generics segment includes specialty generic drugs, active pharmaceutical ingredients and external manufacturing; and the Global Medical Imaging segment includes contrast media and nuclear imaging agents."

Their most recent earnings report was August 4th. MNK announced its Q3 results of $2.05 per share. That beat estimates of $1.83. Revenues surged +47.8% to $965 million. A big chunk of that revenue improvement was due to recent acquisitions. Furthermore, analysts were expecting MNK to report revenues of $984 million. That's a $19 million miss.

The fly in the ointment seems to be sales of Acthar gel. MNK recently paid $5.6 billion to buy Questcor Pharmaceuticals who makes HP Acthar Gel, which is derived from the pituitary glands of pigs. The drug can be used to treat a variety of autoimmune and inflammatory conditions, plus rare skin diseases. MNK reported that sales of Acthar were only up +4% from a year ago, which was a disappointment. Management lowered their long-term forecast for Acthar sales to mid-single digit to low-double digit percentage growth.

MNK's CEO said they're facing pressure from health insurance companies over the price of Acthar. Some insurance companies have gone so far as to restrict coverage or refusing to cover the drug due to costs (source: AP).

The combination of the revenue miss and this disappointing outlook for Acthar sales sparked a serious sell-off in shares of MNK. The stock plunged from $124 down to $102 the next day. Shares have spent the last couple of weeks trying to produce an oversold bounce but traders keep selling the rallies. The point & figure chart has reversed sharply and is now forecasting at $63.00 target.

The $95.00 level was support in early August but MNK is about to break it. Today's intraday low was $94.44. Tonight I am suggesting a trigger to buy puts at $94.35.

MNK can obviously be a volatile stock. I would consider this a more aggressive, higher-risk trade.

Stop Loss: 56.65
Target(s): To Be Determined
Current Option Gain/Loss: +92.6%
Average Daily Volume = 489 thousand
Entry on August 11 at $56.50
Listed on August 08, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Trade Description: August 8, 2015:
The Tupperware brand has been around for over 60 years. Yet the current version of the company was founded in 1996. They went public the same year.
The stock market's huge rally off the 2009 bear-market lows saw shares of TUP surge from $11.00 per share to $97 by December 2013. Unfortunately that was the peak. TUP's stock has been sinking ever since.

TUP is in the consumer goods sector. According to the company,
"Tupperware Brands Corporation is the leading global marketer of innovative, premium products across multiple brands utilizing a relationship-based selling method through an independent sales force of 2.9 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products through the Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics and Nuvo brands."

It's easy to see why investors are selling TUP. The company has lowered its guidance four quarters in a row. The outlook seems to be getting worse. Revenues fell -5.2% in Q4 2014. They reported their 2015 Q1 results on April 22nd. TUP beat estimates but revenues were down -12%. They managed to beat the bottom line estimate in their Q2 report (July 22nd) but revenues were down -12.7%. Currently TUP management is expecting 2015 revenues to fall -10% to -11% from 2014.

The reaction to its Q2 results and lowered forecast sparked a sharp decline that pushed TUP to multi-year lows. There has been almost no oversold bounce. TUP tried to bounce last week and traders sold it pretty quick.

Shares displayed relative weakness on Friday with a -2.59% decline and a new multi-year closing low. The point & figure chart is bearish and forecasting at $44.00 target. Tonight we are suggesting a trigger to buy puts at $56.50. I'm listing the September puts but investors may want to go further out and give TUP even more time. There's no telling where the bottom might be.

Stop Loss: 57.05
Target(s): To Be Determined
Current Option Gain/Loss: +78.9%
Average Daily Volume = 592 thousand
Entry on August 05 at $58.40
Listed on August 04, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments: 08/20/15:
The weakness in WCC accelerated with a -2.2% decline today. I would not chase it here. No new positions.

Tonight we are adjusting the stop loss to $57.05.

Trade Description: August 4th, 2015:
The combination of currency headwinds and a slowing global economy has created a rough environment for WCC's business. Revenues are falling and the strong dollar only makes it worse.

WCC is in the services sector. According to the company,
WESCO International, Inc. (WCC), a publicly traded Fortune 500 holding company headquartered in Pittsburgh, Pennsylvania, is a leading provider of electrical, industrial, and communications maintenance, repair and operating ("MRO") and original equipment manufacturers ("OEM") products, construction materials, and advanced supply chain management and logistic services. 2014 annual sales were approximately $7.9 billion. The Company employs approximately 9,400 people, maintains relationships with over 25,000 suppliers, and serves over 75,000 active customers worldwide. Customers include commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers and utilities. WESCO operates nine fully automated distribution centers and approximately 485 full-service branches in North America and international markets, providing a local presence for customers and a global network to serve multi-location businesses and multi-national corporations.

Looking at some recent earnings reports from WCC the company has missed Wall Street's bottom line estimate three times in a row. Prior to their Q4 earnings report (January 29th), the company issued an earnings warning for their fiscal 2015 on December 17th.

WCC's Q1 report was April 23rd. They missed the EPS number by 10 cents. Revenues were only up +0.3% to $1.82 billion but that missed estimates.
Mr. John J. Engel, WESCO's Chairman and Chief Executive Officer, stated, "We had a challenging start to the year where reduced demand in the industrial market, winter weather impacts, and foreign exchange headwinds weighed heavily on our results in the first quarter. While organic sales per workday grew 3%, sales momentum decelerated through the quarter. Gross margin was down versus prior year but was flat sequentially."

Following their Q1 report WCC management lowered their 2015 guidance again from $5.20-5.60 a share down to $5.00-5.40 per share.

The situation worsened in the second quarter. WCC reported its Q2 numbers on July 23rd. Analysts were expecting a profit of $1.15 per share on revenues of $1.97 billion. WCC only delivered $1.00 per share (a -15 cent miss) and revenues plunged -4.4% to $1.92 billion. The company said their normalized organic sales fell -3.0% and foreign exchange hit them for another -3.0%. They also suffered from falling margins while expenses rose. That's not a good recipe.

Following the Q2 numbers, Mr. Engel, stated, "Our second quarter sales declined 4% reflecting continued foreign exchange headwinds and weakness in the industrial market as well as a slow seasonal start in the non-residential construction market." Management lowered their 2015 forecast yet again. This time from $5.00-5.40 down to $4.50-4.90.

The forecast for WCC is bearish and the stock is getting hammered. Shares are trading at two-year lows. It's hard to say where the next support level is. The point & figure chart is forecasting at $44.00 target.
Tonight we are suggesting a trigger to buy puts at $58.40.

Stop Loss: 91.65
Target(s): To Be Determined
Current Option Gain/Loss: +104.6%
Average Daily Volume = 2.5 million
Entry on August 14 at $93.40
Listed on August 13, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments: 08/20/15:
Reuters ran an article today suggesting the Chinese government's decision to devalue the yuan could make it tougher on the already struggling Macau casino industry. Officially the Macau region, a small peninsula off the coast of China, has their own currency - the Macanese pataca. Yet casinos prefer the Hong Kong dollar. Some casinos accept both the HK dollar and the local pataca (or MOP). There are casinos that only accept the HK dollar. China's move to weaken the yuan makes it even more expensive for Chinese consumers to visit Macau and gamble. The Chinese account for about 60% of gamblers in Macau.

The combination of a weaker yen and the market's big drop sparked a -5.1% plunge in WYNN today. Tonight we are adjusting the stop loss down to $91.65.

FYI: Our put option has doubled in value. More conservative traders may want to take some money off the table.

Trade Description: August 13, 2015:
Casino stocks have been a bad bet this year. CZR and LVS are both down for the year. MGM seems to be an exception with a very minor gain. Yet one of the biggest losers is WYNN. Shares of WYNN are down -36% in 2015. The bear market started last year. Shares of WYNN peaked just below $250.00 in early 2014 and now they're down -60% from the highs. The catalyst for this dramatic decline is a plunge in gaming revenues from Macau.

WYNN is in the services sector. According to the company,
"Wynn Resorts, Limited, owns 72.2% of Wynn Macau, Limited (www.wynnmacaulimited.com), which operates a casino hotel resort property in the Macau Special Administrative Region of the People's Republic of China. The Company also owns and operates a casino hotel resort property in Las Vegas, Nevada.

Our Macau resort is a resort destination casino with two luxury hotel towers (Wynn Macau and Encore) with a total of 1,008 spacious rooms and suites, approximately 280,000 square feet of casino space, casual and fine dining in eight restaurants, approximately 57,000 square feet of retail space, and recreation and leisure facilities, including two health clubs and spas and a pool.

The problems started in June 2014. China launched a nationwide crackdown on corruption. This had a huge impact on how many government officials decided to vacation and gamble in Macau. The region also saw a drop in other high rollers not wanting to be seen tossing money around. Plus the Chinese government enacted harsh no-smoking rules in Macau.
There was a direct impact on gambling revenues that is still being felt today.

WYNN reported its 2015 Q1 results on April 28th. Analysts were expecting a profit of $1.33 per share on revenues of $1.17 billion. The company delivered a profit of $0.70 (big miss) and revenues plunged -27.8% to $1.09 billion. Its Macau revenues were down -37.7%. Management also announced they were reducing their quarterly dividend.

We looked at playing WYNN as a bearish candidate back in June after several
bearish analyst calls on the gambling companies with exposure to Macau. A Sterne Agee analyst noted that table-only gross gaming revenues in Macau were down -46% from a year ago in the first week of June. They estimate that June 2015 will see Macau gambling revenues fall -33% to -38%. June is on track to be the 13th monthly decline in gambling revenues and the tenth month in a row of double-digit declines.

A Susquehanna Financial Group analyst also warned that the region could suffer further declines. There are rumors of an complete smoking ban and there seems to be no let up on the government's anti-corruption efforts.
Meanwhile a Wells Fargo analyst is forecasting June gambling revenues in Macau to plunged -30% to -40% to about $2 billion. This would be the lowest monthly total in more than four years.

The stock saw a big bounce in early July on an upgrade but the rally didn't last. WYNN reported its Q2 results on July 29th. Analysts were forecasting $0.97 per share on revenues of $1.07 billion. WYNN missed both estimates with a profit of $0.74 as revenues plunged -26% to $1.04 billion. Their Macau business saw revenues drop -35.8%.

Believe it or not but shares of WYNN saw a relief rally on this earnings news. Maybe investors were expecting even worse numbers. Yet the rally failed the very next day. That's because the situation in Macau hasn't changed. July was the 14th month in a row of falling revenues for the casino industry.

The recent headlines regarding the Chinese government's devaluation of their currency (the yuan, a.k.a. the renminbi) could be a clue that their economy is slowing down faster than expected. That's bad news for the casino business. If the Chinese economy is retreating it would seem unreasonable to expect a recovery in the gambling business.

Shares of WYNN have plunged to key support in the $93.60-94.00 region. We are suggesting a trigger to buy puts at $93.40. A breakdown to new lows could spark the next leg lower after weeks of consolidating sideways.

Traders should note that WYNN can be a volatile stock. The most recent data listed short interest at 13.7% of the relatively small 80.8 million share float. Currently the point & figure chart is bearish and forecasting an $85.00 target.

- Suggested Positions -

Long SEP $90 PUT (WYNN150918P90) entry $3.25

08/20/15 new stop @ 91.65, more conservative traders may want to take some money off the table now that our put option has doubled in value.
08/19/15 new stop @ 97.25
08/14/15 triggered @ $93.40
Option Format: symbol-year-month-day-call-strike

CLOSED BULLISH PLAYS

Accenture plc. - ACN - close: 99.97 change: -2.90

Stop Loss: 101.85
Target(s): To Be Determined
Current Option Gain/Loss: -56.3%
Average Daily Volume = 2.3 million
Entry on July 31 at $103.35
Listed on July 30, 2015
Time Frame: Exit PRIOR to September option expiration
New Positions: see below

Comments: 08/20/15:
Stocks were crushed on Thursday and ACN was no exception. Shares fell -2.8% and closed below potential support at its 50-dma and the $100.00 mark. Our stop loss was hit at $101.85.

Stop Loss: 102.85
Target(s): To Be Determined
Current Option Gain/Loss: -41.7%
Average Daily Volume = 5.9 million
Entry on August 12 at $106.00
Listed on August 05, 2015
Time Frame: Exit PRIOR to October option expiration
New Positions: see below

Comments: 08/20/15:
Another downgrade for DIS this morning sparked a stampede for the exits. Shares of DIS were trampled with a -6.0% plunge. The stock opened near technical support at its 200-dma and then dropped toward round-number support at the $100 level. Our stop was hit at $102.85.

Personally I'd keep DIS on your watch list. A dip into the $95-96 region would fill the gap from February. Broken resistance in the $95 area should be support.

- Suggested Positions -

OCT $110 CALL (DIS151016C110) entry $2.06 exit $1.20 (-41.7%)

08/20/15 stopped out
08/12/15 new stop @ 102.85
08/12/15 triggered at $106.00
08/11/15 Added a buy-the-dip trigger at $106.00 with a stop at $103.00 and listed the October $110 call
Option Format: symbol-year-month-day-call-strike

chart:

McCormick & Co. - MKC - close: 81.99 change: -1.52

Stop Loss: 82.45
Target(s): To Be Determined
Current Option Gain/Loss: -67.1%
Average Daily Volume = 608 thousand
Entry on August 14 at $85.05
Listed on August 12, 2015
Time Frame: Exit PRIOR to September earnings expiration
New Positions: see below

Comments: 08/20/15:
The pullback in MKC continued on Thursday with its fourth decline in a row. Shares accelerated lower with a -1.8% drop toward $82.00. Our stop was hit at $82.45.